SÃO PAULO — Braskem SA is backing away from a planned multi-billion dollar investment in Brazil's largest petrochemical expansion site, the Petrochemical Complex of Rio de Janeiro (Comperj), likely signaling the end for a project that has been delayed over the past two years due to market uncertainties and rising raw material costs.
Company President Carlos Fadigas said Feb. 12 that after studying its investment options, Braskem will opt to expand production capacity at its plant in Duque de Caxias, projecting a higher rate of return from that investment vs. starting a new unit from scratch.
Brazil's state-run oil company Petróleo Brasileiro SA (Petrobras) was Braskem's partner in the Comperj project, which had construction costs estimated last year at $13.2 billion. Comperj was expected to include production units for polypropylene with annual capacity of almost 2 billion pounds, polyethylene with 2.1 billion pounds, styrene at 881 million pounds and butadiene at 340 million pounds, as well as benzene and second-generation products and resins from Braskem's portfolio.
Petrobras said in January it was revising the construction timeline for Comperj in the wake of a wide-ranging corruption and money-laundering investigation known as “Operation Carwash.” The investigation has spawned class-action lawsuits against Petrobras in the United States, and prompted the company's president and five lead executives to resign in early February.
Braskem's plans to expand at Duque de Caxias also depend on Petrobras, namely its ability to reach a long-term contract for naphtha supply from the oil company.
As the only buyer of naphtha in Brazil and the largest supplier to the local chemicals industry, Braskem has a 9 billion reais ($3.18 billion) contract with Petrobras that expired in 2014 but was renewed through Feb. 28. The companies have battled publicly over a long-term agreement for the raw material's price.
The latest extension avoided an impending shutdown of production at multiple Braskem petrochemical plants, which would have paralyzed Brazil's chemical sector. Braskem officials have warned that they could shut down plants if Petrobras raised its naphtha price by 5-7 percent, as projected.
Braskem consumes 10 million tons of naphtha per year, the main raw material used by the company. More than 7 million tons are supplied to it by Petrobras.